Sterling Estates Builds Big to Stand Out in Crowded Senior Living Marketplace

By The Citizen on September 10, 2019

Now in the fourth decade of his senior living career, Mike Brown is still thinking big — literally.

Brown is chairman of Sterling Estates, a privately held senior living provider that has achieved high occupancy in a crowded market by securing large plots of land and building expansive communities with a focus on wellness.

This is the latest chapter for Brown after a long career that has involved almost every conceivable type of senior housing and care.

He started in long-term care management in the late 1980s, eventually scaling up to a portfolio of about 65 properties. At the same time, he got involved in a variety of other ventures, including a home health business that eventually sold to Gentiva. He also started a finance company with Arnold Whitman, who subsequently went on to found major investment management firm Formation Capital.

After selling or otherwise exiting most of his other businesses, today Brown is dedicated to the private-pay senior living sector. He first entered this segment of the market in the late 1990s, with a portfolio of assisted living properties in Alabama and Georgia under the Azalea Estates brand.

Six Azalea Estates communities remain operational today, but growth is focused on Sterling Estates, which Brown and his partners started in the aftermath of the financial crisis.

“The economy had tanked, and I thought it was the perfect time to get back into the development side,” Brown said.

Through a mixture of opportunism and concentrated effort to secure land, Sterling Estates is now putting the finishing touches on its two existing campuses and is positioned to create its third large-scale development, which would be its biggest yet.

Finding good land

Cobb County, which is northeast of Atlanta and includes the city of Marietta, is a senior living hotbed. With a total population of more than 750,000 people, it is the home of about 70 senior living communities, by Brown’s count. His estimate is supported by listings on online referral platforms.

Despite this robust competition, Brown and his partners were confident that they could create a standout offering when they built the first Sterling Estates community in 2012.

Occupying 10 acres, Sterling Estates East Cobb included amenities such as a 5,000-square-foot wellness center before such offerings had become more widely embraced in the industry. The community also included 18 cottage homes, as well as assisted living.

Heated saltwater pool at the wellness center of Sterling Estates East Cobb

The success of that community attracted the attention of a county commissioner, who pitched Sterling Estates on opening a location in West Cobb. Brown and his partners were interested, but only if they could find the land — they wanted to go bigger than they had with their first project.

A suitable site was not readily available, so the Sterling Estates ownership team took matters into their own hands and bought out 19 separate homeowners to create a 28-acre parcel.

“It was a challenge, but the only way to find good land in these dense areas is, you’ve got to find a way to connect with local landowners,” Brown said. “It takes time.”

The first phase of the West Cobb location opened in August 2016. About three months ago, its 36-unit memory care community — The Grande at Sterling Estates — opened. And in early July, the Hampton residence opened on the campus, consisting of 29 one- and two-bedroom apartments, as well as a clubhouse with indoor/outdoor dining and other amenities. The campus’ current total capacity of 235 units will increase when a final project, consisting of 15 cottage homes, opens next month.

While this construction activity was ongoing, another opportunity presented itself when a real estate broker knocked on the door of the East Cobb community one day. He had a plot of land in nearby Forsyth County that would be the perfect site for another Sterling Estates community, he said.

“We admired his ambition,” Brown said.

He and his team evaluated the land in question, which is northeast of Cobb County, and decided that the broker had been correct. Sterling Estates bought the parcel three years ago and has since added another 15 adjoining acres, bringing the total to 45 acres. So far, 28 acres have already been zoned, but Brown is in no rush to start building, given current high construction costs.

“We said, we’d rather buy and hold,” he said.

A high-end wellness model

Overall occupancy at both the East Cobb and West Cobb communities is over 90%, according to Sterling Estates. Of the 36 newly opened memory care suites in West Cobb, 26 were occupied within two months of opening, Brown said. Of those move-ins, 11 came from Sterling Estates’ own assisted living, while the other 15 came from the community at large.

By way of context, senior living occupancy for the Atlanta metro area was 83.4% as of Q2 2019, according to data from the National Investment Center for Seniors Housing & Care (NIC). Occupancy across the Southeast as a whole was 86%.

The high occupancy numbers show that Sterling Estates was astute in building big and creating an operating model to suit the large campuses, Brown said.

Wellness is increasingly a focus for senior living providers. They are shifting away from a mindset of providing care, and toward enabling residents to maintain their health and independence. For Brown and his partners, wellness has long been a cornerstone of their offering.

Sterling Estates West Cobb, The Club in the The Hampton Independent Apartment Residence

“People are talking about wellness programs, [and] I’m saying, we’ve been there for 19 years. Where’s everybody been?” he said. “We’re excited that others are doing it.”

Sterling Estates’ approach to wellness begins with an assessment of each new resident, ranging from balance and flexibility tests to an evaluation of lifestyle goals. Personalized wellness plans are then developed, and the expansive on-site wellness centers offer the needed infrastructure to carry them out. Offerings include water therapy and aerobics, dance fitness classes, chair yoga, a brain fitness program, and concierge services connecting residents with outside health care providers such as chiropractors, therapists and podiatrists.

Beyond these physical dimensions of wellness, Sterling Estates supports other facets of wellness. For instance, it hired a full-time chaplain with people’s spiritual wellbeing in mind.

Another value prop of the campus model is having a continuum of care available, and the new memory care offering is a point of pride for Brown. Sterling Estates developed the building design and programming in partnership with The Hearthstone Institute, a center that translates memory care research into operational practices and works with leading providers such as Abe’s Garden in Nashville.

All these amenities and options do come at a cost, and Sterling Heights is serving an affluent consumer group. Still, Brown describes its prices as “competitive.” The majority of the care levels are strictly on a rental model, but the independent living cottages have a modified entrance fee of about $150,000, which is 80% refundable once the next tenant takes possession of the cottage.

Looking to the future, Brown does believe that the senior housing industry as a whole needs to find ways to offer more affordable products. He believes technology will support that effort by decreasing staffing costs related to simple tasks.

And while he is confident that Sterling Estates stands out from the “standard,” smaller senior living model that is predominant in its markets, Brown also welcomes new high-quality competition.

“I think obviously the industry has changed, has become a lot more accepted by a lot of different investment groups and types, and I believe that people recognize that the next group of consumers has greater expectations and needs,” he said. “I think in the future, more good competition is going to bring out a better product.”